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The power of HR in startup businesses

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With small businesses opening in increasing numbers, why is HR crucial and when is a good time to incorporate it?

HR in a world of startups

We live in a startup world and nowhere is this more evident than in the Middle East and other emerging markets. Across the developing world, young people especially are using their creative energy to start and build businesses in every sector; the time is right for them. Despite conflicts and still-fragile economies, there is a growing middle class who are desperate for new, home-grown and innovative products as well as services that are designed for them and the way they live their lives. Such startups are able to give them exactly what they want.

Startups identify needs and fill this gap in the market; they are people-centric. But what about the people who found and run these businesses? At what point do you stop thinking as individuals and start behaving like a growing business? When do you start thinking about building the foundations that will enable your business to stand the test of time? And when do you start turning your attention to HR?

Don’t leave it too long

In my experience, many early-stage organisations think they don’t need HR at all. And the ones that recognise that they do need it, keep putting it off. Most leave it too long before they set aside the money to create an HR function. I totally understand why startups are so shy about HR – it can be a big step. But I can assure you that there’s nothing more devastating to a startup with a great idea, than a human resources disaster. It only takes one lawsuit, a wrong hire, or an ill-advised organisational structure to take a great idea straight into the proverbial waste bin of ‘business ideas that failed’.

HR helps you hire the right people to grow

I know the idea of having an HR advisor or consultant to help you create your infrastructure may seem antiquated. Many creators of new organisations can be seen running from traditional corporate structure, in coffee shops and ‘We Work’ spaces all over the world, winking and nodding that they’re going to be the first company that does this without HR. They outsource payroll, hire a contract recruiter, hang some posters in the break room and figure they’ll handle the rest. They’ve seen boxes on an organisation char and old offer letters sitting around somewhere. The rest will take care of itself. Right?

Wrong.

Those actions are mere administrative details of a large-scale process that requires careful planning from the start. For example, if you don’t clearly define your job categories and descriptions, you risk winding up and getting sued by someone who says they were promised one thing and got another. Even if this doesn’t happen, can you afford to keep losing good people who are unhappy over and over again?   

Offer letters are a crucial part of hiring, but your recruiting process should be planned from a much higher level, ideally from your top-level vision, strategy, and management decisions. Who you are and what your business actually does creates the tasks necessary to get that done, and that requires some thought on how those tasks should work together, at what levels, and with what compensation structure in order to attract the right people. For example, hiring your best friends only works for as long as those relationships stay intact. Even your buddy from your first job can turn out to be a bad hire if they’re not in a clearly defined role – one for which they’ve been properly vetted.

HR is about more than just hiring people

Also, when you start growing to an organisation larger than possibly five people, who’s going to make all the decisions around legal, governance, and compliance? Performance reviews, leadership development, compensation strategy, benefits, bonuses, recruiting, employment rights… By the time you’re done with all of that, you’ll have no time left to run the business. You need someone to mind the store; a specialist HR person who can leave you free to do what you’re best at – turning your startup into a thriving small business.

A great HR person will help you build firm foundations on which to grow – and fast. They will get involved in every aspect of your business, help you drive change and keep on track. Successful HR leaders in small businesses get their hands dirty – they’ll roll up their sleeves and show you how HR can motive your staff, keep you focused on your vision and help you across every area of the business.

If you ignore HR, your startup could fail

When I share these thoughts with startup founders, I see a lot of nodding heads, always accompanied by a slight hesitation. The comments that follow are usually the same, along the lines of: “Perhaps when we get to a certain size, it makes sense to add HR” and “I already have someone that takes care of administrative stuff”.  And they all say: “We need to keep our overheads down.”

But here’s the truth: so many small companies thought they could survive without a human resources expert, but those startups who believed it wasn’t necessary just aren’t around anymore. They’ve failed.

Remember, human resources is not a burden, it’s an investment in the long-term security of your business.

Rita Trehan

By Rita Trehan

Rita is a senior executive and chief HR officer teaching companies how to rethink business. www.ritatrehan.com

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